Bringing you live news and features since 2006 


China’s Central Bank seeks to discourage idea that Yuan is a “one-way trade”


Faced with the task of cooling off its credit markets and discouraging excessive foreign currency flows, China has recently demonstrated a willingness to let the value of its currency decline, contrary to the long-held belief that buying the renminbi was effectively a “one-way trade”.

This is according to Fran Rodilosso, fixed income portfolio manager for Market Vectors ETFs.
“The perception in the market has been that the renminbi could only appreciate in value,” says Rodilosso. “It looks now as if the Chinese have set out to dispel that belief with the People’s Bank of China likely to allow the currency to trade in a wider band, with more latitude to move to the downside.”
Rodilosso says China is now fighting many battles at once, trying to control the deceleration of growth while also discouraging hot money flows and excessive credit creation. He noted that investors in renminbi-denominated equities and debt are indeed used to a steady appreciation, with the currency one of very few to appreciate versus the US dollar in 2013. The prospect of greater currency volatility is something that investors will likely start to consider, and ultimately may lead them to demand more compensation, in the form of yield.
A cheaper currency is a mixed blessing for investors, according to the Market Vectors portfolio manager.
“A weaker currency does have the effect of making it cheaper to repay debt denominated in that currency, potentially a small credit positive for some issuers,” Rodilosso says. “On the other hand, holders of the dollar debt of Chinese issuers, particularly those domestically-oriented companies without significant dollar revenues, might have greater reason to be concerned from a credit perspective.”
As China continues to seek what it believes is the appropriate level for its currency, investors would be well advised to keep a close eye on the actions of the Chinese Central Bank, Rodilosso says.

Latest News

As the ETF industry reaches a milestone of USD12.71 trillion in global assets, Brown Brothers Harriman writes that its 2024..
Matteo Greco, Research Analyst at Fineqia International writes that bitcoin closed last week at approximately USD66,300, marking a 7.8 per..
HSBC Asset Management’s (HSBC AM) ETF and Indexing business has passed USD100 billion in assets under management (AUM), reflecting its..
Amundi’s ETF Market Flows Analysis for April reveals that investors added EUR54.1 billion to global ETFs in April with equities..

Related Articles

Dan Miller, IQ-EQ
With just over a week to go till T+1 settlement begins in North America, Canada and Mexico, time is of...
Emily Spurling, Nasdaq
Last October’s ETF Express US Awards 2023 found Nasdaq winning Best Index Provider – ESG ETFs and Best Index Provider...
Vinit Srivistava, MerQube
Index provider, MerQube, launched in 2019, with the aim of providing a “technology-driven answer to the most complex, rules-based investment...
Sean O' Hara
Pacer ETFs has announced the launch of three Cash Cows UCITS ETFs. The firm writes that this will give European...
Subscribe to the ETF Express newsletter

Subscribe for access to our weekly newsletter, newsletter archive, updates on the site and exclusive email content.

Marketing by